What are the Benefits of Registering a Company

Setting up a new business can be pretty challenging. During the journey, an entrepreneur has to make many important decisions. One of the major decisions is whether to register the business as a company with Ministry of Corporate Affairs (MCA).

Company registration gives the business a separate legal identity and allows it to operate as a registered company under Companies Act, 2013. In this article, we discuss the main benefits of company registration in India.

Benefits of Company Registration

Below, we have explained some of the key benefits of registering a company. These benefits make MCA new company registration a compelling choice for many businesses in the country:- 

Separate Legal Entity

A company has a separate identity from the Directors, Promoters and Shareholders. It registered with the law as an artificial person and denoted as a “juristic person”. The company can buy, sell and own property or can sue and be sued in its name.

Limited Liability

A limited liability is one of the main benefits of a private limited company. Partners in a partnership firm generally have unlimited liability. However, the shareholders in a company tend to have limited liability protection. 

Limited liability means that the liability of shareholders is generally limited to the unpaid amount on the shares they hold. Their personal assets are generally not used to pay the company’s debts merely because they are shareholders.

More Investors

One of the important benefits of MCA company incorporation is that it can help a business attract investors. Investors generally look for businesses with good growth potential, a clear business structure and proper legal compliance. A registered private limited company can also make it easier to raise funds from investors because the company has a separate legal identity and a structured ownership system.

With help of funding, companies can expand their operations, improve their existing products/services or introduce new ones and build customer trust. However, it is important to note that company registration alone does not guarantee investment/funding. It only provides a proper legal structure that can help attract potential investors. 

Some examples of well known private companies in India include many startups and established businesses that have raised funds from investors, such as CRED and Zerodha and Razorpay Tech Solutions Private Limited to name a few.

Perpetual Existence

In perpetual succession, a company continues to exist until it is legally dissolved. This is possible because the company has a separate legal identity from its members. 

After registration, the company’s existence is not affected by changes in its members, shareholders, directors or employees.

Transferability of Shares

Shares of a company are regarded as movable property. This means they can be transferred from one person to another, subject to provisions of the Companies Act and the Articles of Association of the company. In a private limited company, transfer of shares is subject to certain restrictions mentioned in its Articles of Association.

In a public company, the shares are freely transferable, subject to applicable legal and procedural requirements. Therefore, transferability of shares can make it easier for shareholders to transfer their ownership interest in company.

Owning Property

One of the benefits of company registration is undeniably the fact that a company can acquire and hold property in its own name. The property belongs to company and is separate from personal assets of its shareholders. 

This helps maintain a clear separation between company’s assets and personal assets of its owners. Even if there are changes in shareholders, the property continues to belong to company. 

Conclusion

In conclusion, company registration offers several benefits to a business. Some of most prominent benefits are separate legal identity, limited liability, perpetual succession and the ability to own property in its own name. It can also help a business build a structured image and attract potential investors. However, the benefits may vary depending on the exact type and structure of company. Therefore, entrepreneurs should understand legal requirements very carefully before choosing company registration.

Similar Post:

1. What is meant by one person company?
2. How to start your own internet company?
3. How to check company details in MCA?

Frequently Asked Questions (FAQs)

Q1. Can a company own a property in its own name?

Yes. Since a company is a separate legal entity from its owners, it can certainly own a property in its own name.

Q2. What happens to a private limited company if one of its shareholders dies?

In such a situation, the company continues to exist while deceased shareholder’s shares are dealt with according to Companies Act, 2013, company’s Articles of Association and succession laws.

Q3. Do one person companies offer limited liability protection?

Yes, indeed. The liability of the sole member of a One Person Company (OPC) is generally limited to unpaid amount on shares held by them.

Q4. Does a public company have perpetual succession?

 Yes. A public company has perpetual succession. This means that it continues to exist regardless of changes in its members, shareholders or directors until it is legally dissolved.